What if Los Angeles Goes Bankrupt?
Nero, they say, fiddled while Rome burned. Are Los Angeles officials doing the same?
Civic leaders and columnists are lashing out at inaction by the city in the face of record deficits. The current deficit is over $200-million with a $485-million deficit forecast for the next fiscal year. Bond rating agencies have notified city officials L.A. bond ratings are on the verge of tumbling down if no action is taken to deal with the problem.
Mayor Antonio Villaraigosa called for 1,000 city jobs to be eliminated. The City Council put off action on job cuts for 30 days. The delay was imposed not to examine if these particular job cuts are the right ones to make but to stall making the cuts at all. And, what of these proposed job cuts? Is the mayor going after only public employees not covered by a recently negotiated contract? Are the cuts real or are some workers simply being moved to agencies funded by Special Funds instead of the General Fund?
Why Con Con’s Pause Is Bad For California
Aarrrrrrrrrrrrrrrrgh!
I have a little less hair to tear out after two pieces of news yesterday.
1. The effort to call a constitutional convention is on life support after signature gathering was “paused” because the con con committee, Repair California, doesn’t have near enough money to qualify.
2. Democratic donors and interests are coming together to spend $20 million to attack Meg Whitman and help make Jerry Brown governor.
If you want to know why California’s governing system is in disrepair – and why the it won’t be fixed anytime soon – just consider those two pieces of news together.
Leadership on jobs growth emerging
California has often claimed leadership on many big issues and movements. It’s time for policymakers to claim leadership where it matters most — growing our job base. A 12.4% unemployment rate, a $20 billion state deficit, a manufacturing sector that lost more than 607,000 jobs since the decline started, and a negative 5.97 public-to-private sector job ratio since 2001 leaves California in a stranglehold of deterioration.
Both parties introduced jobs packages in the last 24 hours that indicate the Legislature is now focused on leading us out of this mess with a policy environment that at least thinks of job impacts first. Up until now, the employer, employee and unemployed communities in California were left wondering why California leads on everything but jobs and our economy.
Numbers Add Up for High Speed Rail
It sounds like Charles Crumpley of the Los Angeles Business Journal understands some of the advantages of high-speed rail in California, and all he needs is a little help to dig through the numbers, which can too easily be skewed. So, let me outline a few numbers that a businessman, if not an editor of a business newspaper, might appreciate.
First, 25 percent. That’s the portion of the cost of the high-speed rail system that will be borne by the state. A little less actually – $9 billion from $42.6 billion. The balance will come from the federal government, private entities, or cost-sharing agreements with local governments. What other public infrastructure project can boast that percentage? A private entity would leap at the chance to make such a capital investment only putting down a quarter of its own money for each dollar expended, and so shouldn’t the state.
We Can Do Much More to Reduce the Federal Deficit
The White House has just announced its proposed budget for fiscal year 2011, with a projected deficit of a staggering $1.27 trillion. Last year’s budget estimated a $1.17 trillion deficit, but the actual number now appears to be $1.60 trillion. Applying that same likely growth from projection to actual deficit, we are looking at a federal budget deficit closer to $1.74 trillion this year.
The size of the deficit is unconscionable and unsustainable. As a nation, we now owe more than $12 trillion, a number almost as large as the entire GDP of the United States. Even worse, we are adding to this deficit at a rate of more than 10 percent of the GDP—an alarming rate that most economists consider dangerous for any economy.
To finance our deficit, we print money and spend it—or we borrow money and spend it. When we print the money, we set the stage for massive inflation, which will occur as soon as the economy revives. When we borrow the money, we place a lever in the hands of citizens and governments of China and other nations, now our largest creditors (surpassing the 50 percent mark two years ago). It is morally wrong to spend money now and expect our children to pay the price—and it is hazardous to give to foreign sovereigns the tools to destroy our economy if they decide to “call in” their loans.